The Mexican economy faces a new challenge as remittances, a crucial source of income for millions of Mexican households, recorded a decline in July 2024. According to the latest data released by the Bank of Mexico (Banxico), remittances amounted to $5.614 billion in July, marking a 1 percent drop compared to the same month last year. This decrease represents the third instance in 2024 where remittance income has fallen on an annual basis.
Despite the decline, July 2024’s remittance figures still rank as the second highest on record for that month, only surpassed by the amount received in July 2023. However, the significant concern lies in the month-over-month comparison: remittances contracted by 9.6 percent compared to June 2024, the steepest drop since January of this year.
U.S. Labor Market Struggles Impact Remittances
Economic analysts are attributing this downturn to the weakening U.S. labor market. Gabriela Siller, Director of Economic and Financial Analysis at Banco Base, pointed out that the drop in remittances is closely linked to the deteriorating job situation in the United States, where many Mexican immigrants are employed. “Bad data. The drop in remittances is related to the deterioration of the U.S. labor market,” Siller commented.
Supporting this assessment, recent economic indicators from the U.S. have shown a contraction in employment across various sectors. In August, all five regional manufacturing reports in the U.S. revealed a decline in factory payrolls. Additionally, employment indicators for service providers also fell, as reported by Bloomberg.
The situation is further compounded by Americans’ growing pessimism about job prospects. A Conference Board report released on August 27 highlighted that the percentage of people finding it difficult to secure employment reached its highest level since March 2021. This decline in employment opportunities in the U.S. directly affects the ability of Mexican immigrants to send money back home, leading to a reduction in remittances.
A Detailed Breakdown of Remittance Data
Banxico’s report indicated that the $5.614 billion received in July was derived from 14 million transactions, with an average remittance amount of $402. While the number of transactions increased by 0.8 percent, the average amount per transaction contracted by 1.8 percent, underscoring the economic pressure on individuals sending money.
Despite the recent monthly decline, the cumulative remittance income for the first seven months of 2024 stands at $36.94 billion, representing a 2.9 percent increase from the $35.906 billion recorded in the same period of 2023. However, when examining a broader timeframe, the remittance inflow from August 2023 to July 2024 amounted to $64.353 billion, slightly below the $64.408 billion recorded from August 2022 to July 2023.
Future Outlook and Economic Dependence on Remittances
BBVA Mexico’s economic studies department estimates that Mexico will receive $66.5 billion in remittances by the end of 2024, which would account for 3.7 percent of the national GDP. This projection exceeds the federal administration’s estimate. In his Sixth Government Report, President Andrés Manuel López Obrador anticipated remittance inflows of $65 billion for 2024, which would represent an annual increase of 2.6 percent if achieved.
The importance of remittances to the Mexican economy cannot be overstated. “More than 1.7 million households, or 6.1 million people, depend directly on these resources,” BBVA Mexico emphasized in its report.
